Apple share price growth steady as company seeks inclusion in DJIA

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on Apr 28, 2014
Updated: Oct 10, 2019
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Unprecedented gains by Apple baffle doubters!

The Chief Executive Officer (CEO) of Apple Incorporated (AAPL) has recently taken steps to calm the nerves of investors who doubt the company’s recent gains will hold. Apple Inc.(AAPL) has been posting consistent gains since June 2013 when it slipped to $393.78 per share. Since then, the company has managed to rally and maintain strong and steady growth since the start of the New Year. This is evidenced by the share price of Apple Inc. (AAPL) which has consistently traded above $522 so far in 2014. This marks a strong comeback from the pre-$400 level that the stock was trading at barely a year ago.

Split the Stock 1 for 7 and Feed off Chinese Demand

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Tim Cook (Apple Inc. CEO) sought to reassure investors of the inherent value of Apple Inc. (AAPL) stocks by taking a multi-pronged approach: record numbers of iPhone sales to China Mobile Limited, as well as Apple’s intention to repurchase $30 billion shares, and raise its dividend and split stock at a ratio of 7 to 1. The recent rally in the Apple share price has marked an 8.2% increase to $567.75. This is the highest share price for Apple for 2014 – largely due to the deal with China Mobile Limited which is now selling large numbers of iPhones to the Chinese market.

Cook is seeking to split the stock so that it will be trading at approximately $75 per share. This will make it easier to be included in the Dow Jones Industrial Average, since the current trading price is too high for it to be considered for inclusion. The century-old Dow evaluates companies by their share level, not market value and at current prices Apple would have significantly more influence in the equity gauge were it to be included. By the close of trade on Thursday, 24 April, Apple Inc. (AAPL) stocks had climbed 0.8% on the NASDAQ 100 index. It should be pointed out that stock splits are increasingly rare nowadays. During 2013, it was reported that only 14 companies on the S&P500 Index split their stocks.

Apple Inc. (AAPL) earnings for the 2nd quarter of 2014 are expected to be somewhat flatter than investors would prefer. There are however many adjustments to Apple products that have investors excited. These include the 8GB iPhone 5C, the iPhone 6 and the possibility of the iWatch being launched. Other major players including Credit Suisse and UBS are anticipating strong growth from Apple Inc. (AAPL) by Q4 2014. While sales have been a little slow with China Mobile Ltd, they are expected to pick up as the year progresses.

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Since Apple is one of the world’s most innovative companies, there is no doubt that it will surprise investors with industry-leading technology in the near future. The iWatch is being touted as Apple’s next big thing, but the company is mum on the release of this innovative wearable technology. Since the passing of Steve Jobs in 2011, Tim Cook has been entrusted with the CEO role. Under his stewardship Apple has not yet released any major products, so the iWatch will be a big development for Apple and specifically for Cook. Once the new product range is announced, investors will have a better idea of where Apple Inc. (AAPL) is headed.

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Cook says Apple has the Right Ingredients

The Apple Incorporated (AAPL) CEO has been under increasing pressure of late to bolster growth in the company. Since the company has yet to release new products, growth has slowed and investors are a little skittish. For 2014, the stock has reportedly dropped 6.5% , but Cook is convinced that the current stock price is well below Apple’s true value. Clearly one of the biggest stories for the tech sector in the US is Apple’s decision to split its stock price. Since the stock price is currently trading at $525, the 7 to 1 split would approximately peg the stock price at around $75. This is likely to take place by June 2, 2014.

Investment analysts at Banc De Binary have long been convinced that the high share price of Apple has been the reason it has been kept out of the Dow Jones Industrial Average. Price considerations aside, Apple Inc. (AAPL) is a value stock as there is still significant upside potential. Should Apple move to around $75, it would be listed alongside other industry heavyweights in the index like Visa Inc. (V) and UnitedHealth Group Inc. (UNH). The company with the lowest share price is Cisco Systems Inc. (CSCO) at $23.33 per share. By splitting the stock, Apple will be more attractive to the everyday investor. At over $520 per share, it is only the heavyweights in the industry who can afford to purchase quantities of Apple Inc. (AAPL) stocks.

Will Apple Inc. (AAPL) List on the Dow Jones Industrial Average (DJIA)

The ongoing bull market (since 2009) has pushed many technology stocks into the stratosphere. Companies like Google Inc. (GOOG) and Apple Inc. (AAPL) are major players in the US market and the global market. Their inclusion in the DJIA would invariably lead to massive distortions. The price of shares in the S&P500 Index is three times greater than their level 4 years ago. Both Apple and Google face the same issue in the DJIA; their present stock prices are simply too high for inclusion. The SPX:IND has been trading around the $1800 – $1900 mark for most of 2014. This contrasts sharply to the $1600 – $1700 range for 2013. Membership of the DJIA is decided by way of a committee. It is rather unusual to have new companies listed, but it is not altogether uncommon. Since the DJIA is largely reflective of the US Market, it would be sensible to include one of the market’s key participants in Apple Inc. (AAPL).

 

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